Deciding how far a person can go is not hard work, but the three costs

The so-called “scale” seems to be a unit of measurement, but in reality it reflects a truth from the perspective of economics, that is, everything has a price.

The price is also the cost, but it doesn’t just mean money.

There is never a free lunch in this world. If someone is willing to provide you with a free service, rest assured that his client is not you, and you are just his product.

Premier League table[/caption]For example, when I was in school, I was confused. I wondered why the bar in front of the school gate was doing “Lady’s Night”. I only knew that there was always a group of wolves hungry when there was an activity day.

Later, I realized that girls at that time only loved to be busy and didn’t like to drink. The profit of the bar came from boys.

In other words: the products that the bar manages are women, and the customers who really save money are men.

Another example is the search engine that every one of us uses. It seems to be free and not costly. In fact, it has long been sold as a product. Search engines want scale, and advertising is mainly exposure, which is the transfer of benefits and costs.

Therefore, we often say that the free is the most expensive.

Because others often need to be exchanged for a huge price, such as time and attention, now he can get it for free, why not?

Therefore, looking back, life is actually a process of continuous accounting, time is the most valuable wealth resource for each of us.

Unfortunately, since the first day we came to life, life has entered a countdown: this resource is losing in one minute and one second.

As a result, many people began to pay attention to ROI “return on investment, ROI = (return – cost) / total investment”, and strive to create greater profits in the same unit time.

However, the fate of life is uncertain and unknowable. Therefore, masters tend to pay more attention to costs and pay more attention to the effectiveness of each time investment.

In other words, the future is unpredictable, we can’t decide the amount of time we have, but we can grasp the quality of our time commitment.

Therefore, if we want to use our time more effectively and achieve stable and sustained growth, we must have a “cost thinking” to improve our cost efficiency from the following three dimensions:

First, the opportunity cost: how to find the right direction?
Freedom is shackles, and choice is to give up.

Life is a process of constant choice and choice. There are costs in choosing. In short, to give up something in order to get something, this is the “opportunity cost.”

The above reason seems to be simple, but it is difficult to know.

For example, marriage choices and careers, most of the time we don’t know how to work hard, but we don’t know how to choose. Because every choice you make means an overdraft to another choice.

In other words, the hardest part of life is not the effort itself, but when you are too free and have no direction.

For example:

I remember when I graduated from college, I wanted to start a business. Faced with a new world, I feel that there are opportunities everywhere, and gold is everywhere.

The problem is coming. There are so many opportunities, but I don’t know where to start. Because I thought that if I did A, but the investors are optimistic about B, then it is a good opportunity to miss?

At the same time, a friend around me is facing similar problems. So he pulled out a bad move and made three ass kicks (business plan) at the same time. Investors who faced different tracks took out different plans.

Unfortunately, the venture capital circle is too small.

Later, this buddy not only did not get the money, but also bears the crime of “not reliable”, and only ran away to work.

So when opportunity costs arise, it means how we can turn an open choice into a closed, specific goal.

It’s like when I was a kid, I didn’t know the correct answer in most cases, so the best strategy is to use the “exclusion method”, which is to find your own “Stop doing list”.

We will experience countless large and small choices throughout our lives, some choose to do the right thing, and some choose to do it wrong.

I think the more important is the latter.

For example: choose a partner, everyone expects to meet better, no one wants to make it.

However, “better” is endless, so if you look at those happy marriage partners, it is not that they know what is best, but what they know is the least.

There is no such thing in the world as “just choose the right one,” but we can use our experience to learn to get rid of those wrong choices.

This principle is especially applicable in business.

For example, BBK, OPPO/vivo and other companies behind the trading method Yongping, he always insists on a set of his own “Stop doing list”:

There is no sales department (to meet the needs of users first, rather than relying on blind sales);
Don’t talk to the customer alone about the price (all customers have one price, saving both parties a lot of time and energy);
No OEM (there is no big difference in the products of the foundry, it is difficult to have a profit);
No interest-bearing loans (never falling on the chain of capital chains);
Try not to see the media (to prevent the credit of the core team);
But socializing (it is better to invest in health than to get to know a lot of things).
The so-called “doing something and not doing something”, in Duan Yongping’s view, not doing something wrong is more difficult than doing the right thing. Because the latter can save more time and cost, it will increase efficiency.

The opportunity cost tells us a simple truth that fish and bear’s paw can’t have both. From another angle, it actually tells us that the so-called good or bad is not determined by how everyone judges, but the key is what kind of cost you need to pay for it.

This is like the previous product design company, adhering to the “coming is a customer” concept, no matter what customer I will pick up. After all, the cost of refusing a single business is too great.

Later, I gradually found that I lost the competitive advantage in all the single points. Over time, the customers left me.

Therefore, looking back, if you want to reduce the loss of opportunity costs, you should use the “stop doing list” to continuously reduce your options, to eliminate the interference caused by short-term benefits.

Especially when people go to thirty, if you want to come first, you should consider no more choices, but should be in the same direction, on the same track, to win your greatest advantage.

Second, the sunk cost: how to seize the opportunity?
As we all know, the so-called sunk cost refers to the cost that has happened in the past, but has nothing to do with the present or the future.

For example, you fell in love with a boy, but suddenly he found out that he was a scum man. At this point you are very angry, but you are not a scorer, because you have invested too much in the past. This past feeling is your “sinking cost.”

In the movie “A Generation of Masters”, the father of Gong Er said to Ye Wen: “If you remember, you will have a resounding.”

The greatest pain in life is the fact that it is covered by known negative emotions. It is clear that one thing is wrong, but still can’t help but add more.

In dealing with this situation, the late Qing Dynasty minister Zeng Guofan once said such a sentence, “The future is not welcoming, the present is not mixed, and the past is not in love.”

The so-called “never love”, it teaches us not to indulge in the past, that is, “timely stop loss.” The best way to deal with a scum man is to get yourself into the next paragraph as soon as possible.

In the case of entrepreneurship, there is a word called “trial and error.”

Ma Yun once delivered a speech called “Success depends on the speed of your trial and error”. It talks about: trial and error as a means of tactical layer, the essence is not to make mistakes, but to seize the opportunity in a changing environment. To increase cost efficiency for a successful path.

Between the two points, the shortest is the straight line, and the fastest is the curve. Especially on the road to success, there is never a straight line, so trial and error is the only way for everyone to grow up.

I remember that when I first started my business, it was especially easy to fall into a “perfect fallacy.”

In short, when I have an idea, I spend a lot of time in the early stage of product design, always looking forward to my own stuff.

Sometimes, I will argue with others about whether a button is red or blue for three or four days. If a function point is involved, I would like to take a month or two to discuss it.

This kind of “perfectionism” criticism, in addition to ignoring the user’s perspective, also greatly increases your sunk costs. For example, if you know something, you have already missed the opportunity, but you still can’t help but treat the dead horse as a living doctor.

Conversely, smart entrepreneurs are never caught up in past costs. As the saying goes, “the world’s martial arts will not break fast.” Excellent entrepreneurs are good at optimizing the path from iteration and looking for opportunities from trial and error.

Give another example:

Before, I had a friend from Yunnan. He resigned from the system and went to public office. He wanted to sell tea from his hometown when he was idle, so he ran over and asked me and a few friends to make suggestions.

After listening to him, everyone said that they were not optimistic and threw him a bunch of questions. For example, if your tea has a selling point, what competitive advantage it has, whether it has a brand name, the product packaging design is not enough cool, etc…

In the face of everyone’s doubts, I saw him face-to-face, originally thought he would give up, but never imagined that after two days he actually sent a circle of friends, roughly meaning that he had to take out 100 boxes of tea for free. people. for free!

Of course, this “free” is conditional, that is: if you think the tea is delicious, please help send a circle of friends and recommend this tea to your friends around you; if it is not good, it doesn’t matter, right to send your welfare.

Guess what happens to this incident?

Obviously: Anyone who took his free tea has no good intentions to make friends.

The so-called “eat a short mouth, take people soft”, it is said that that month, he relied on this “free” method to sell more than 1,000 boxes of tea.

Later, this buddy relied on the reputation of more than 1,000 users, and gradually began to systematically build the brand road of their own tea business, integrate the supply chain, find design to do packaging, build channels to engage in distribution… In short, he Still the idea: dare to try and make mistakes, small steps to run.

So over-the-top, each of us may fall into a “known” misunderstanding. In other words: Known often means sunk costs, a wandering from past experience.

The so-called “trial and error” is essentially an empty cup mentality. That is, when you encounter uncertain choices, rely on efficient iterative thinking to verify objective facts.

As in economics, there is a saying that sunk costs are not costs.

Because of past mistakes, it is often the most profitable investment for the future, not the cost.

Third, the marginal cost: how to improve efficiency?
Before, I have shared many opinions about “index growth”. In my opinion, if you want to achieve exponential growth, you must first have a necessary premise: high leverage.

Because of the high leverage, there is one of the most immediate benefits, which is to keep your “marginal cost” down.

For example, most Internet companies follow the bit rule, which means that the larger the margin, the lower the marginal cost.

For example, Ctrip, where to go, such an online ticketing company, it develops a platform, the cost is so much, the larger the scale, the lower the cost to each user.

So looking back, the so-called “marginal cost”, it refers to the cost you have to invest when you increase the output per unit.

Network effects, marginal cost, these two terms are most often mentioned by investors, but not all companies with the “Internet” banner, it is very likely to be the pseudo-concept of “hanging the sheep to sell dog meat” .

for example:

There were a lot of companies doing O2O door-to-door car wash business before, but fell down overnight, why?

Imagine: Assuming that a master can wash 10 cars a day, even if you order through the line, you can wash up to 10 cars a day. If you consider the traffic jam, return bills and other factors, he may only wash 8 cars a day.

In this case, although many companies adopt a large subsidy strategy, in essence, the marginal cost has not decreased, but has risen. What do you say is not a bubble?

Therefore, when we consider one thing, we can often consider it from the perspective of cost.

The success or failure of the same thing, sometimes we can not only work hard, but also consider the cost behind it.

Back in my daily work, I always have the idea that if you really decide the height of a person’s growth, you will often rely on your efforts to work overtime, but whether you really have the conscious intention to establish your own “cost advantage.”

So how do you build your own cost advantage?

I personally think there are two points to follow:

Make good use of network effects;
Productize the work content.
First, how to make good use of the network effect.

For example:

There is no doubt that Chinese people are paying more and more attention to privacy.

But in retrospect, at the beginning of the WeChat circle of friends, I remember that many people will send several statuses almost every day, and will actively add a lot of friends.

But nowadays, more and more people are beginning to block the status of their friends, even if they are far away from those strange friends who are good-natured.

Think about it, if you are a company responsible for marketing, when you want to promote your own products, is the most effective way to go door-to-door?

Of course not, you must hope that there is a way to know that many people will know once they release it. Nowadays, the circle of friends is just such a “battlefield”. No matter what kind of work you do, if you want to build your own influence, the method must not be “rejecting people thousands of miles away.”

In other words: the web is a tool, and whether it involves your privacy is related to how you use the tool.

Second, how to productize the work content.

We often like to use income to measure a person’s ability to obtain wealth, but in my opinion, if one’s income is twice that of another person, but he spends twice as much time as a person, then the relative he created The value is still zero.

On the other hand, if your income is the same as others, and you spend only half of the time, it means that your marginal benefits are higher, and you are really “rich.”

The same is an example:

I remember when I was a product design company, there was an AE (business execution) underneath. Every day, she had to face a variety of different customers to come to consult and ask for price, and she was very upset.

Therefore, in order to “lazy”, she began to classify customers from different industries, and designed several sets of different processes and packages in a targeted manner. The documents were organized into three documents according to the medium and high prices. Once there is a strange customer inquiry, she Just throw it at the other party.

As a result, she has saved a lot of time and can be used to maintain relationships with customers and continuously improve her performance.

So you see, marginal cost awareness can not only be used in a huge business model, but also can specifically guide every problem we face in our work.

Its purpose is only one, that is, “how to make a limited time, the greatest possible reproduction.”

Therefore, we often say that some things seem to be very expensive, but they are actually the cheapest, such as real talent, because he can greatly establish your cost advantage, and thus increase your marginal benefits.

Finally, let us summarize it again: Deciding how far a person can go is not an effort, but the cost of these three things – opportunity cost, sunk cost, marginal cost.

“Opportunity Cost” tells us that when faced with a big choice, we must establish our own “Stop doing list”;
“Sinking Costs” teaches us to be brave in trying to make mistakes, and to break the gaps in past cognition with an empty cup mentality;
“Marginal cost” allows us to recognize the nature of efficiency and build personal advantage with the bit principle.
When people live in the world, the biggest cost is often invisible. It is like an “invisible hand” that always hinders the way we go.

Perhaps the way you treat costs may not be able to determine your cap, but one thing is certain, it will definitely determine the lower limit of your unbeaten.

As we often say: People, the hardest thing is not to defeat others, but to be themselves.